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How to choose a bank that will not suffer from sanctions, and why to do it

Almost all major Russian banks in 2022 came under tough US, UK and EU sanctions. These banks are no longer able to carry out some transactions, and customers are experiencing inconvenience in service. We will tell you how to choose a bank that is less likely to be under sanctions, and whether it is worth paying attention to it at all.

The content of the article

What are the penalties for banks?

Large Russian banks have been under sanctions since 2014, but all these years their impact has not been very significant. But the sanctions that banks began to fall under since February 2022 are much more serious and tangible for both banks and their customers.

There were several stages in total:

  1. were first sanctioned Promsvyazbank, Rossiya Bank and several banks focused on work in Crimea. Sanctions were then imposed by the United States, Great Britain and the EU – and this was on February 22 (that is, before the start of the well-known events);
  2. already on February 24 in the evening, the United States introduces tough blocking sanctions against VTB, Otkritie, Sovcombank, Novikombank. Special sanctions are being introduced against Sberbank in the United States – American banks are prohibited from opening correspondent accounts for it, and sectoral sanctions have been introduced against Alfa-Bank and MKB in the United States;
  3. at the same time in the UK under tough sanctions falls VTB, Otkritie and Sovcombank;
  4. then the EU disconnects from the SWIFT system Promsvyazbank, VTB, Otkritie, Sovcombank and Novikombank;
  5. after some time, US sanctions apply to Sberbank and Alfa-Bank, Great Britain – to Sberbank, MKB, UBRD and Gazprombank. And the last sanctioned bank in the United States was Transcapitalbank.

There were sanctions from other countries, but their impact compared to American and European restrictions is insignificant.

That is, under sanctions in one form or another fell almost all banks from the top ten, but the types of sanctions are completely different. And while for one bank the restrictions are very insignificant, the clients of others have faced serious problems.

How sanctions affect customers

Sanctions, by their original design, are designed to paralyze the Russian economy and the banking sector. That is why banks were chosen that form about 80% of the assets of the entire Russian banking system. And the impact of sanctions this time is really quite serious.

Let’s analyze how sanctions affect customers, by type:

  • tough blocking sanctions from the US (when the bank is on the SDN list) – means that the bank is blacklisted for any transactions in US jurisdiction and with US counterparties. Such a bank cannot have correspondent accounts with banks from the USA, raise capital in the markets of the USA and some other countries, and generally cooperate with counterparties from the USA. In fact, such a bank cannot even conduct international settlements in dollars (although such a bank is not prohibited from opening dollar accounts within the country), and cannot work with clients who are engaged in foreign economic activity.

    One of the worst consequences – the fact that the official mobile applications of banks disappear from the AppStore, Play Market and AppGallery stores. If on Android the application can be installed directly from the site, then for owners of Apple devices there is only a mobile version of the online bank on the site;

  • blocking sanctions from the UK and other countries – also imply a complete blocking of the bank’s assets and transactions in this jurisdiction. For example, in the case of British sanctions, banks lost the ability to settle in pounds sterling;
  • disconnect from SWIFT – means that the bank will not be able to work with international transfers through this system. Transfers via SWIFT go to two details – this is the SWIFT code of the bank and the client’s account number in the bank, which allows you to send money from account to account in any bank in the world (directly or through a correspondent bank). This system is used for large payments by businesses and governments – therefore, disabling it means that bank customers will not be able to send official international transfers on accounts;
  • sectoral sanctions – the mildest version of the restrictions. The current sectoral sanctions against Russian banks prohibit them from selling new share issues and placing bonds for more than 14 days on the US capital market. In fact, these sanctions reduce the opportunities for the development of the bank, but do not affect the operating activities.

Separately, it is worth mentioning those clients whom the banks that fell under the sanctions served as brokers. If a bank falls under severe US sanctions, it is prohibited from selling and buying foreign securities on behalf of its clients. That is, clients had to rush to transfer their assets from Alfa Investments, Otkritie Broker and other banks to other brokers (but in this situation such operations were not subject to commissions).

Thus, the activities of banks are most seriously affected by the tough blocking sanctions from the United States and the disconnection from SWIFT. There are currently 8 such banks in the SDN list, respectively, and 6 of them are disconnected from SWIFT. In Russia, they continue to operate without any special restrictions, but the very fact of falling under such restrictions is quite a serious stress for their clients.

Which bank to choose so that it does not fall under sanctions?

At the moment, most of the Russian banking system is already under sanctions – these are the largest and, in general, systemically important banks. This means that the sanctions are already fulfilling their main task – they are holding back the country’s financial system, although the imposition of sanctions against new banks is not excluded. And the recent inclusion in the SDN list of Transcapitalbank together with Investtorgbank is another confirmation of this.

And time sanctions against the bank – not a deadly, but an undesirable scenario, then it may be worthwhile to pre-select a bank that does not fall under them. If we compare the data and opinions of experts, then the alignment is as follows:

  • banks with foreign capital will not be subject to sanctions. There are several such banks in Russia, including Raiffeisenbank, UniCredit Bank, Citibank, OTP Bank and some others. Formally, these are Russian banks with a license, and foreign participation is limited to those who own this bank (the owner of a bank in Russia is quite seriously isolated from its management). But even in this scenario, banks with foreign capital are unlikely to fall under restrictions – from the West it would be illogical;
  • independent private banks except for the largest. We have already seen how Alfa-Bank, MKB and Sovcombank fell under severe restrictions, so it’s worth focusing on smaller banks: for example, it could be Uralsib, MTS Bank, Home Credit Bank (although it is also foreign), Bank Saint Petersburg ” other. They have no guarantees that they will not fall under sanctions, but if this is not the largest bank, and its owner has distanced himself from politics, then the risks are small;
  • Gazprombank – simply because for European countries this will soon be the only option for transferring payments for Russian gas (the new ruble scheme, which was not accepted by some countries, was nevertheless accepted by other countries).

However, it should be understood that the further fate of other Russian banks will largely depend onhow the tragic events that began in February 2022 will end. In the event of an escalation of the conflict, the sanctions lists will expand, and if it can be resolved in a way acceptable to all parties, then some of the sanctions may be lifted or weakened (however, the latter has hardly been observed since 2014).

All this should be taken into account, first of all, by those who work with foreign contractors. The risk of being left without the opportunity to pay for the delivery or repay the debt if the bank falls under sanctions is high for them. But in the case of ordinary clients, everything is far from being as tragic as it seems.

Should we be afraid of sanctions at all?

At the moment, little has changed for clients of banks that have been sanctioned: some currency transactions with foreign counterparties have become inaccessible to them, they had to transfer foreign securities to other brokers, and mobile applications have disappeared from stores (and push notifications have disappeared in already installed ones). Otherwise, the sanctions are the problem of the owners and management of banks, not their clients.

If you look at the main banking products, it turns out that the sanctions did not affect them:

  • bank cards. Cards of Visa and Mastercard payment systems of Russian banks stopped working abroad, but this is not a consequence of the sanctions, but the consequences of the withdrawal of these companies from the Russian market. That is, regardless of the sanctions, you cannot pay with a Russian bank card abroad, plus it cannot be tied to Apple Pay or Google Pay. In Russia, all cards work without problems thanks to the NSPK.

    Exception – cards of the Chinese payment system UnionPay, which officially refused to cooperate with banks that fell under sanctions. Accordingly, if you pay 15 thousand for a Gazprombank card, and then it falls under sanctions, this will be money thrown away, because it will not work abroad.

  • contributions. Payments on deposits do not depend on sanctions, the conditions of existing and new deposits did not change from them. The return of the principal amount and interest in total up to 1.4 million rubles is guaranteed by the state, regardless of whether the bank has been sanctioned or not;
  • loans. The conditions for issued loans do not change – the client will not pay more or less, neither the terms nor the currency in which the loan was issued change;
  • transfers and settlement services. In Russia, everything works as usual, transfers abroad may be limited due to sanctions (to those countries that have introduced them and in their currency);
  • acquiring. In Russia, all cards issued within the country are accepted for payment. Visa and Mastercard cards of foreign banks are not accepted at terminals and ATMs, regardless of whose ATM or terminal it is (and whether this bank is subject to sanctions).

So choosing a bank is not based on the criterion of “cleanliness” from sanctions, but on financial parameters. And here, according to Mikhail Payushin of the Freeviser law firm, large state-owned banks still remain the most stable. But banks with international capital, on the contrary, take risks – for example, Rosbank buys out the structure of Vladimir Potanin, although before that the bank belonged to the French Societe Generale.

And economist Nikolai Neplyuev recalled how banks that fell under tough sanctions began to offer customers higher interest rates on deposits and savings accounts. They needed to compensate for the panicky outflow of customer funds, on which they were able to make good money.

To summarize: when choosing a bank, it is necessary to take into account not the risk of sanctions, but its financial position and place in the market. Given the possibility of providing support, the largest state-owned banks still look the most reliable – they will fulfill their obligations to customers in any situation, despite the actions of other countries.

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